Creating Value

Are you getting the most out of your business?

Business owners start businesses for a variety of reasons. A few do it to make a lot of money, but a vast majority do it for other reasons.

Some have an idea they believe the world needs. Some have a social mission in mind. And some just can’t work for anyone else (I include myself in that group). Whatever the motivation, at the end of the day, it all comes down to creating value, whether it’s business value or personal value. Surprisingly, though, not enough business owners think about this.

When they start a business, they know they have to fill a market need, and they know they have to make a profit. But in many cases, they have had no formal business training, and they don’t speak the language of business, which is finance. And they very likely haven’t stopped to think that they might one day want to leave the business. Instead, at first anyway, they concentrate on keeping their customers happy and having enough cash in the bank to pay their bills.

Here’s another problem: Most owners know more about running their businesses than anyone else in the organization. When it comes time to sell or transfer the business, prospective buyers aren’t interested in the skills of the buyer; they’re interested in cash flow. Buyers want to see regular growth and profit margins and a business that has systems that work without the owner.

I’ve been trying to understand how businesses build value for more than 35 years. One of the things I’ve learned – from the businesses I’ve owned, from reading a book a week for 35 years, from developing seminars for others and attending several educational sessions a year – is that value is in the eye of the beholder.

I grew up in a family business, a vending and food service company. I joined the business after college and within a year had bought a branch of the company from my father. At the time, the branch was grossing $75,000 a year in annual revenue. Twenty years later, when I sold the business, it had grown to four branches, 90 employees and $6 million in revenue. During that time, I made a zillion mistakes and even learned a bit along the way.

After the sale, I tried working for a large mutual life insurance company for a couple of years but learned that I’m a lousy employee. And after that, I helped found Stage 2 Planning Partners, a wealth management firm. My specialty in the firm is working with owners of privately held businesses. In fact, they are the only people I work with.

Some of the things I help clients examine are whether they are on the road to financial independence, whether they are moving from active management to passive management of their businesses and of course whether they are creating value in their businesses.

This fits nicely with the title of my channel on this blog, Creating Value. I believe creating value is a keystone in making one’s life better. And I find that helping clients find out what will create value in their life helps me fill my personal mission of doing interesting things with interesting people.

My goal in writing for this blog is to help the people who read it ask themselves good questions about what’s important to them. In these posts, I expect to explore the importance of passive ownership, performance indicators, cash flow, developing a niche business and hiring and developing employees.

One of the defining events in my life has been my cancer experience. Three and half years ago I was diagnosed with non-Hodgkin lymphoma, Mantle cell variety. This is a nasty and rare lymphoma. Luckily, I’m in remission, which has allowed me to focus on leaving a positive footprint as I move through life. I see the opportunity to write this blog as part of leaving a positive footprint.

Thanks for reading, and I hope you’ll share your thoughts as we go through this journey together.

Article source: http://boss.blogs.nytimes.com/2012/09/13/introducing-creating-value/?partner=rss&emc=rss